SS on NFP & More

Social Security (SS) is out with preliminary numbers for January’s payroll tax revenue:

This is, of course, a preliminary number, and there will be revisions. The January data is based on a set of assumptions that SS uses to run its computers. Actual data will take at least three months. I find it interesting that SS is assuming that the US economy starts off the year in low gear.

-The January 2013 YoY increase in payroll tax revenue is projected to be $1.1B (+2.2%).

I looked at the YoY % changes in SS tax revenues. Its pretty clear that the big improvements in Q1 – 2012 will not be repeated in 2013:

Possibly the computers at SS are taking into consideration a “post cliff” slowdown. The CBO has projected a decline in GDP in the early part of the year, so it is possible that SS is modeling based on that assumption. (The 2% increase in payroll taxes sucks out $10B a month in spending power.)

The payroll numbers for Q1 2012 were very solid: January + 275K, February 259K , March +143K, Total = 677k. The early read from SS is that we will be lucky to see one-third of that in 2013.

I do look at the SS numbers in the context of the monthly Non-Farms data. This is a murky analysis as the BLS fudges its numbers with various adjustments. Looking backward over a longer period of time, there is a correlation between SS and NFP, but in any given month, it's random.

To the extent that the SS numbers do tell a story, they are suggesting that the December NFP will be a tad on the soft side. Under 150k; my best guess is 125K. The wild card is Sandy. ADP thinks the storm added 40k construction jobs. (Zero Hedge discussion). That could bring the actual total for the month closer to 165k. We shall see.

The December NFP is looking like a non-event. The real question is what is going on in January. It’s freezing in “Sandy Land”; it will be for weeks. I doubt that much construction is getting done. Between the cold, and the cliff drag, it looks like a slow start to the year.

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SS has also come out with the January 2013 Benefits Paid number. A lumpy $66.666B went out the door.

The benefit “nut” for January is $3.3B, (5.1%) higher than a year ago. The YoY payroll tax revenue was up only $1.1B (2.2%). Got that? Revenues up 2%, expenses up 5%. Boom!

The January numbers can be used by wonks like me to estimate annual results. The bottom line at SS in 2013 will be a cash deficit of $75B. The 2012 deficit was $52B.

Keep in mind that the deficits at SS must be funded by issuing more Debt to the Public. The debt needed for SS is ON TOP OF the debt needed to fund the government’s other operating deficits.

The USA now has two big drivers of debt. Most folks understand that the deficit adds to the debt. The country will soon learn that SS is becoming a very big driver of incremental debt. The upcoming debate on entitlement reform will force the issue of SS = Debt to come on the table. I can hear the howling already….

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The government will put social security and government pensions and 401k money and military pensions and pension guarantee corp all into the "treasury pension bonds". If the fed slows down on writing bad checks, all pensions will be bankrupt anyway. Let no crisis go to waste, the government needs to be more important and has it's eyes on the loose money in 401Ks, anyway.

As someone else pointed out on another thread, the MIC enforces the worlds reserve currency status of the US dollar. Amazing how many governments are willing to accept a green piece of toilet paper in exchange for their valuable goods and services.

China has nuclear weapons and factories. They probably laugh at the money wasted on 800 foreign bases and that's why they tell the BRICS and anybody else that will listen, to stop using the dollar for foreign trade. Maybe not the bribed foreign leaders, but the foreign people who get bombed or missles or bases parked in their back yard are probably supportive of the Chinesen on that. More and more every year. It will be foreign countries that decline billions in bribes to host bases that bring down the MIC, not congress.

maybe if the corporate welfare (entitlements for the rich) dump off their responsibilities of running a proper business of taking care of workers benefits and healthcare instead of cooopting the gubbament chronies with lobbyists and PAC monies to get them re elected in return for corporate welfare and dumping retire benefits on to the public. We are very close to China with their refusal to make public company balance sheets as the commies call them state secrets,

Take away the loop holes for not paying their fair share of doing business in the US and you may not need as much social security, the scum corps. are dumping thier workers onto the public costs.

Michael Hudson asks the simple question: why can we print in unlimited quantities to fund bank bailouts and new wars, but not for Soc.Sec? Soc.Sec must pre-fund, and must be paid by the very recipients of the benefit. Maybe we can get the banks to pre-fund their next bailout too?

This is the correct answer. It's all fucking paper (or more appropriately, ones and zeroes in a computer). It's all just a game of slowing and/or speeding up the rate of increase of those ones and zeroes, and trying to maintain an increasingly eroding faith that those ones and zeroes are tradeable for actual goods and services. It's all theatre.

LOL. No. And plans and promises are worth the paper they are printed on plus the political will to see them thru. Let the t-bill holders worry about t-bills. There is plenty of political will behind those SS IOUs.

Glad you can deal with this crap, Bruce. My tolerance for policy wonk speak peaked in the 90's, but it matters not.

I know what they are going to do. Gross pointed out this morning, the Fed already buys 90% of new treasury issues. They are going to CANCEL THE DEBT! Not all of it. The shit would hit the fan, just the part "owned" by the Fed. Back door printing of the most subtle and treasonous kind, but possible, and the only out.

Show me I'm wrong, Bruce. I would really like to be wrong on this, but I feel it coming. This is the way the world ends.

Why cancel it? Since the "profit" on those bonds is remitted to the Treasury it's mostly a wash. One could use the argument that the high debt to gdp damages the bond market, but as has been pointed out the Fed is the bond market. In this way they can keep kicking the can more effectively without making big waves that might tip of our foreign creditors that we are scamming them.

Cancel it because the interest becomes too burdensome. Exponential growth bites you eventually, even when rates are as low as they are now. You end up with most of the budget going to interest. Japan is going to cancel at least 20% of its BOJ held debt. Eventually, the USA will mint trillion dollar coins.

Extreme back door printing. They fund the government with debt, and later, only a little later cancel the debt, flooding the money supply just as if every taxpayer got a 50,000 dollar check for Christmas, except THE FUCKING GOVERNMENT SPENDS THE MONEY. Not easy to understand, but that's the beauty of the con. Most taxpayers won't associate the out of control spending directly with the write off.

It squares the circle. Some of the better minds here have been trying to figure out how you get to wrenching inflation with no jobs and wages in the toilet. There is only one way. Print the money. This is how they will print, and control the money. The perfect Statist Coup, and what's to stop them?

I'm not saying they won't do that, but they don't need to write it off. In effect it's already an accounting trick, the Fed "buys" Treasury paper, which in turns pays interest to the Fed which in turn is remitted back to the treasury. The excess money bleeding out of the system comes via gov spending (hello money to connected!), as you point out. I think they will do this, but I don't see why to make the accounting entry to cancel the debt.

Imagine this instead "My fellow Americans, the debt to gdp is now over 150%. I know many of you are hurting so we cannot let those people down now, when they need it most. So I have proposed additional taxes on those who are doing so very well in this economy when so many of us are doing so very poorly. And it is my hope that we can finally reign in this growth of debt, thank you and God bless" AKA tax the hell out of the remaining producers and consolidate the wealth. Like Lenin said using the twin forces of inflation and taxation.

Taxes are fairly obvious. Inflation is more diffuse and harder to place the blame.

Thanks for staying with me on this. You're focused on the income, and quite right about that, but look at the principle. This year the government will spend 1 trillion more than it takes in. The fiction is that they will some day repay that debt. They won't. Here's the kicker.

Next year the deficit could be two trillion, then three, then to the moon.

Somebody has to pretend to buy those IOUs or the IOUs that the feral Reserve and China hold will be worth less. I think the Feral Reseve will push away from the blackjack table with the chips they have and concentrate on raising taxes, interest rates and austerity while lowering the annual deficit as quickly as possible. They cant lend out an additional $5 trillion or $10 trillion that they never had to begin with or like you say, the debt wont be taken seriously and no attempt will be made to pay any of it back. That's why they are saying they've shot their wad, just before the debt ceiling talks. They need to cut the deficit by $700 billion soon which will mean 10-15 million jobs or maybe 30 million jobs with substantial wage cuts. Either way, money pulled completely out of the economy with unemployment and severance pay tacked on.

I'm 60+. My son and I play a game called 'what is happening to America's Ass?' Walmart is a good place to play. At first we just would giggle and he would point. Now that he is a little older the game is not to show emotion over the gi-nor-mosity we see before us... and yes some are boomers but the fat is pretty well spread over the demographics.

My point is that we boomers can be cruel... becareful what you say about us ya punks.

So when will Flemming v. Nestor begin to apply to more people("restrictively") than just commie aliens(Nestor)?

I think we're getting close.

Background to the Case:

The fact that workers contribute to the Social Security program's funding through a dedicatedpayroll tax establishes a unique connection between those tax payments and future benefits.More so than general federal income taxes can be said to establish "rights" to certaingovernment services. This is often expressed in the idea that Social Security benefits are "anearned right." This is true enough in a moral and political sense. But like all federal entitlementprograms, Congress can change the rules regarding eligibility--and it has done so many timesover the years. The rules can be made more generous, or they can be made more restrictive.Benefits which are granted at one time can be withdrawn, as for example with student benefits,which were substantially scaled-back in the 1983 Amendments.

There has been a temptation throughout the program's history for some people to suppose thattheir FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if aperson makes FICA contributions over a number of years, Congress cannot, according to thisreasoning, change the rules in such a way that deprives a contributor of a promised futurebenefit. Under this reasoning, benefits under Social Security could probably only be increased,never decreased, if the Act could be amended at all. Congress clearly had no such limitation inmind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OFPOWER," specifically said: "The right to alter, amend, or repeal any provision of this Act ishereby reserved to the Congress." Even so, some have thought that this reservation was insome way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

As I've suggested here before: In my working life I've had social security taxes rise and fall, and social security benefits be increased and decreased. This is nothing but another goverment program and what you recieve (if anything) is up to politicians. Does that everyone feel better?